Gross Domestic Product

Unit II: Part II: 
Gross Domestic Product: 

GDP- Gross Domestic Product: total dollar value of all final goods and services produced within a country's borders within a given year.

Formulas: GDP: 
C+Ig+G+Xn

C= Consumption (67% to the economy- purchasing finished goods and services)
Ig= Gross Private Domestic Investment
1. Factory equipment
2. New factory equipment
3. New constructing housing
4. Unsewed inventory built in a year
G= Government spending
Xn= Net exports
                    Exports-Imports



Excluded from GDP:
1. Used on secondhand goods
2. Intermediate goods- goods and services that are purchased for resale or for further processing or manufacturing.
*Trying to avoid multiple or double counting
3. Non market activity- illegal drugs, any unpaid work, doing your own repair jobs at home, babysitting, prostitution, growing your own vegetables for your own consumption.
4. Financial Transaction: stocks bonds real estate.
5. Gifts or Transfer Payments:
Gifts are gifts given to you
Transfer Payments:
Private: produces no output, simply transfers funds from one private individual to another. (Ex. Scholarship)
Public: where recipients contribute nothing to the current output or production. (Welfare. Social Security)